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The Week In Review (July 9, 2007) : What To Watch For

Strong job growth and rising wages is putting inflationary pressure on the economy

As expected, the holiday-shortened week led to extreme volatility in mortgage rates, led by better-than-expected job growth and rising wages for workers. 

In conjunction, these two data points lead to increased consumer spending and the prospect of higher spending pushes the economic slowdown likelihood lower. 

That's bad news for mortgage rate shoppers because without a slowdown, mortgage rates are unlikely to make a dramatic decline like they did at this time last year.

There's not much data this week except for Retail Sales on Friday.  You can bet that markets will keep a close eye on this one; it's a terrific report to gauge whether Americans are spending more dollars (as expected) or not. 

The Retail Sales report will be backed up with the University of Michigan Consumer Confidence survey.  The survey asks random sets of Americans how they feel about the economy and is used by markets to predict spending patterns in the months ahead.

So, big focus this week on spending as it pertains to economic growth.  More spending and high confidence will push mortgage rates higher.

(Image courtesy: The Wall Street Journal Online)

Posted on July 09, 2007

How Revisions To Previously-Released Data Are Pushing Mortgage Rates Higher

Mortgage rates are higher on better-than-expected jobs data

On a stronger-than-expected jobs report and upward revisions to April and May's figures, mortgage rates are moving higher this morning.

Against an expectation of 120,000, the Bureau of Labor and Statistics reported that 132,000 new jobs were created in June.  This not a huge deal in and of itself. 

It's the revisions that are causing markets to move Friday.

Revisions are a normal part of government data.  They occur because the government bureaus cannot survey every business in the country prior to get an exact figure. 

The government, therefore, talks to a small subset of business and then projects that data across the whole economy using sophisticated statistical analysis tools.

The Non-Farm Payrolls report, for example, is usually released on the first Friday of a month -- hardly enough time to get a comprehensive look at jobs data country-wide. 

This is one of the reasons why the BLS also released data for April (+ 42,000 jobs) and May (+ 33,000) -- it's had more time to pin down the actual number after the original "estimate".

It's the revisions that are mostly to blame for higher rates today.  Overall expectations were beat by 87,000.

Posted by Bill Murphy on July 9th, 2007 9:56 AMPost a Comment (0)

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